What OT Logistics S.A.'s (WSE:OTS) P/S Is Not Telling You

There wouldn't be many who think OT Logistics S.A.'s (WSE:OTS) price-to-sales (or "P/S") ratio of 0.7x is worth a mention when the median P/S for the Shipping industry in Poland is similar at about 0.9x. However, investors might be overlooking a clear opportunity or potential setback if there is no rational basis for the P/S.

We've discovered 4 warning signs about OT Logistics. View them for free.

Check out our latest analysis for OT Logistics

What Does OT Logistics' Recent Performance Look Like?

As an illustration, revenue has deteriorated at OT Logistics over the last year, which is not ideal at all. Perhaps investors believe the recent revenue performance is enough to keep in line with the industry, which is keeping the P/S from dropping off. If not, then existing shareholders may be a little nervous about the viability of the share price.

Want the full picture on earnings, revenue and cash flow for the company? Then our free report on OT Logistics will help you shine a light on its historical performance.

What Are Revenue Growth Metrics Telling Us About The P/S?

In order to justify its P/S ratio, OT Logistics would need to produce growth that's similar to the industry.

In reviewing the last year of financials, we were disheartened to see the company's revenues fell to the tune of 49%. The last three years don't look nice either as the company has shrunk revenue by 64% in aggregate. So unfortunately, we have to acknowledge that the company has not done a great job of growing revenue over that time.

Weighing that medium-term revenue trajectory against the broader industry's one-year forecast for a contraction of 7.2% shows the industry is more attractive on an annualised basis regardless.

In light of this, it's somewhat peculiar that OT Logistics' P/S sits in line with the majority of other companies. With revenue going quickly in reverse, it's not guaranteed that the P/S has found a floor yet. Maintaining these prices will be difficult to achieve as a continuation of recent revenue trends is likely to weigh down the shares eventually.

What We Can Learn From OT Logistics' P/S?

It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that OT Logistics currently trades on a higher than expected P/S since its recent three-year revenues are even worse than the forecasts for a struggling industry. When we see below average revenue, we suspect the share price is at risk of declining, sending the moderate P/S lower. In addition, we would be concerned whether the company can even maintain its medium-term level of performance under these tough industry conditions. This would place shareholders' investments at risk and potential investors in danger of paying an unnecessary premium.

Having said that, be aware OT Logistics is showing 4 warning signs in our investment analysis, and 1 of those can't be ignored.

If these risks are making you reconsider your opinion on OT Logistics, explore our interactive list of high quality stocks to get an idea of what else is out there.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.